CS Deepak Pratap Singh

Section 237 of the Income Tax Act, 1961 deals with refund of excess tax paid by the assessee. If any person or assessee satisfies the assessing officer that the amount of the tax paid by him or paid by any person on his behalf during any previous assessment year exceeds the amount with which he is properly chargeable under the act for that year, he is entitled to refund of excess amount paid.

The authority will also after considering the facts and circumstances of the case issue order for the refund of excess tax paid by the assessee. It is right of the assessee to demand excess tax paid over as tax assessed.

Section 238 ;- Generally a refund can be claimed the person , who has paid the same but in a case of clubbing of income under provisions of Sections 60 to 64 , the refund is claimed by the person, in whose income , income of others are clubbed. In case of liquidation of a company its official liquidator or in case of death or incapacity of a person his/her legal representative will claim the refund.

Time Limit of Refund Claim;- Refund will be claimed in Form no. 30 and verified in prescribed manner and within a period of one year from the last date of the assessment year.

Note: The department (CBE&C) has directed the assessing officers to consider the claim of refunds if filed beyond the time period as prescribed on the following terms and conditions;

  1. The cases where delayed claims of refund are being considered would be taken up for scrutiny.
  1. The refund has arised due to excess tax deducted/ collected at source and payment of advance tax also and refund does not exceed Rs. 50, 00,000 for one assessment year.
  1. The income of the assessee is not taxable in the hand of any other person.
  1. No interest will be admissible on the belated refund claims.
  1. No claim has been entertained if a period of 6 assessment years has been passed.

Refund in case of appeal; – (Section 240)

If any refund arises from any order of the assessing authority, the assessee has not required to file form for the refund; the assessing officer is bound to order for refund suo motu.

Interest on refund( Section 244A):- The interest will be payable by the department in case of refund, the interest @6% p.a. will be paid from the date of payment of tax or penalty to the date of grant of refund or date of signing of order. No interest will be payable if the excess payment of less than 10% of the tax determined under provisions of Section 143(1) of the Income Tax Act, 1961.

The period of interest will be the date of payment of tax to the date of actual payment of refund.

If there is delay on the part of the assessee, then the interest for the period, which attributable on the part of the assessee will not be given by the department.

Note: in cases when assessment has been reframed under provisions of sections 141(1), 143(3), 154,155. 250, 254, 260, 262 etc., the amount on which the interest was payable was increased/decreased; the interest portion will also increase/decrease accordingly. The Assessing officer may issue demand notice for recovery of excess interest paid in those cases.

The denial of interest by the department has not been made unless an opportunity is given to the assessed of hearing.

Note: the interest will not be paid on TDS deducted erroneously by paying party. As decided in case of Universal Cables Limited v. At CIT [2010] 191Taxman 370(MP), the assessee has deducted tax source erroneously under Section 194A in respect of payment to IDBI, though no tax was required to be deducted from such payment. On assessee’s request, the department granted refund of the amount deducted. The court held that on such refund interest will not be available under section 244A.

Note: The department cannot deny the payment of refund to the assessee on the ground that the TDS certificate in respect of TDS deducted at sources has not been submitted by the assessee within time, if taxes has been deducted and timely paid to the government.


Section 245; – empowers the Assessing Officer to adjust refund due to any assessee of any assessment year against any outstanding tax due of the previous years. But no adjustment of refund against tax due will be made without giving a notice to the assessee in this regard.

If Assessing Officer has adjusted the refund against tax due without proper notice in this regard to the assessee , then it will be against the provisions of Section 245 and liable to be quashed.

Fresh intimation is required under Section 245; any notice or information under provisions of Section 141(1) is not intimation.

As decided in the case of S.S. Ahluwalia v. ITO [1996] 135 CTR (Gauhati) 225, where certain assessment had been held to be bad, the amount of tax recovered for such assessment years which become refundable cannot be retained by the department for being adjusted against tax due in respect of other assessment years.

As it is decided that an assessee cannot ask the department to adjusted amount of refund against any tax payable by him of any assessment year.

The demand of one person cannot be adjusted against refund of another person, but as decided in case of Glaxo Smith Kline Asia (P.) Ltd. V. CIT[2000] 160 (Delhi), a further implicit requirement is that the revenue will have to be satisfied that the assessee will not be in a position to satisfy the demand of tax and that for the setoff, the outstanding tax amount cannot be recovered at all.

Now a days, what we have paid as tax or TDS/TCS if any deducted or collected has been reflected in Form 26AS.

As decided in the case Court on its own motion v. CIT [2012] 210 taxman452 (Delhi), Revenue cannot make adjustment contrary to procedure prescribed under Section 245 based on the wrong data uploaded by the Assessing Officer. One the amount is correctly and rightly reflected in Form 26AS, small or technical mismatch in return should not be make a ground to deny credit of amount paid. In cases TDS data reflected in Form 26AS requires rectification, notice should be issued to the assessee to revise or correct mistake and only if necessary rectification or correction is made, an order under section 143(1) should be passed and demand should be raised.

(Author can be reached at cs.deepakpsingh@gmail.com)

Click here to Read Other Articles of CS Deepak Pratap Singh

More Under Income Tax

Posted Under

Category : Income Tax (27896)
Type : Articles (17602)

One response to “Refund Under Provisions of Income Tax Act, 1961”

  1. Piyush Singh says:

    My employer issue a order for recovery of excess payment, which is paid to me for a long time more then 5 years. is this aforesaid excess payment exempt for income tax.

Leave a Reply

Your email address will not be published. Required fields are marked *

Featured Posts